2012 Development Market Report
By Michael Golden and Thaddeus Wong on Mar 1st, 2013
2012 @properties report on development market activity & pricing trends.
Welcome to the 2012 @report, an overview of market activity and pricing in eight core Chicago neighborhoods, prepared for our developer, investor and institutional clients.
Chicago’s residential for-sale market pulled itself up off the mat last year and even managed to win a few rounds. After slogging through 2011, transaction volume soared in 2012 while prices finally began to show some bounce in certain submarkets. The city of Chicago experienced a 19% increase in units sold and a 6.7% gain in the average sales price in 2012, according to data from BrokerMetrics / MRED, LLC. In the areas covered by the @report, unit volume was up by 34%, with prices inching up 1%. Condo sales within the report area tracked similar gains.
With the huge surge in transactions, one of the big stories from 2012 was the lack of inventory. In the city, average months supply was down 42% from 2011. And a recent report from the National Association of REALTORS pegged months supply at its lowest level since April 2005.
Another major trend impacting the local for-sale market is the fevered pitch of multi-family development and investment. Institutional investors are pile-driving cap rates on core assets, while deep-pocketed private equity has brought a pseudo-institutional dynamic to non-core assets in the neighborhoods beyond downtown. The good news for the condo market is that apartment occupancies and rents are at all-time highs. In December, Crain’s Chicago Business cited a study by Deutsche Bank in which the average Chicago apartment rent outstripped the average mortgage payment by 31%.
With pent-up demand and essentially no new condo deliveries since 2010, small-scale development has started anew. In neighborhoods like the West Loop, Lincoln Park and Lakeview, low-rise new-construction activity experienced a notable increase last year, and developers are making bigger plans.
Consistent with overall market activity, @properties saw strong sales last year in the developments we represent. At 10 East Delaware, we sold over 25 units and are down to our final four. We sold 20 units at 6 North Michigan in the Loop, and only the penthouse remains. Early last year, we took over sales at The Legacy at Millennium Park, overhauled the marketing, and sold $30 million in nine months.
We are pleased to announce that we are now offering leasing and management services for apartment developers and owners. As with our condo-sales programs, our leasing programs are available with a full-complement of in-house, agency-quality marketing, including digital marketing, advertising and PR.
A couple of housekeeping notes regarding the report. First, new for 2012, we have added coverage of the Loop submarket. This year’s Loop overview does not include quarterly data for 2011, but future reports will offer the quarterly comparison. Also, with the addition of the Loop, we have redrawn the borders for Streeterville (see Neighborhood Borders), and in order to make an accurate year-over-year comparison went back and applied these changes to the 2011 data.
The investments we have made over the past several years in marketing, technology, new offices and human resources underscore our optimism about the Chicago real estate market. We are as excited as ever about our business, our city and the opportunity to help make your next deal a great success!
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